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The theory of finance (Behavioural finance (FOAM POEM) ((the effect of)…

- - - - looks after company's cash
      - raises new capital
      - maintains relationships with banks, shareholders and other investors
      - often subordinate to financial controller.
- - - - costs of incentivising managers (remuneration)
      - costs incurred in monitoring managers
      - managers not acting in shareholders' best interests
      - ways to reduce
        
        structuring remuneration to align interests of managers and shareholders e.g. linking pay to share price
        
        employing objective and independent non-exec directors to represent shareholders' interests
  - - - freedom for ownership to change without affecting operational activities
      - freedom to hire professional managers
    - - lead to agency costs
- - - - free, competitive capital market so shareholders can choose investments that meet needs for cashflow, risk etc.
      - all shareholders seek to maximise current worth